Finance (No. 2) Act 2023

149 Arm’s length requirement for certain transactions

(1) Subsection (6) applies to a member of a multinational group if any of Conditions A to D are met.

(2) Condition A is that—

(a) a debit is recorded in the underlying profits accounts of the member that arises from a transaction (“the relevant transaction”) comprising a transfer of an asset between the member and another member of that group,

(b) both members are located in the same territory, and

(c) the relevant transaction is not recorded on an arm’s length basis.

(3) Condition B is that—

(a) the member is party to a transaction (“the relevant transaction”) with another member of that group,

(b) both members are located in the same territory,

(c) one of the members is a minority owned member and the other is not, and

(d) the relevant transaction is not recorded in the member’s underlying profits accounts on an arm’s length basis.

(4) Condition C is that—

(a) the member is party to a transaction (“the relevant transaction”) with another member of that group,

(b) both members are located in the same territory,

(c) one of the members is an investment entity and the other is not, and

(d) the relevant transaction is not recorded in the member’s underlying profits accounts on an arm’s length basis.

(5) Condition D is that—

(a) the member is party to a transaction (“the relevant transaction”) with another member of that group,

(b) both members are located in the same territory, and

(c) the recorded value of the relevant transaction is not the same in each member’s underlying profits accounts.

(6) Where this subsection applies to a member of a multinational group, the underlying profits of the member are to be adjusted to secure that the relevant transaction is reflected on an arm’s length basis.

(7) In this Part “arm’s length basis”, in relation to a transaction between members of the same multinational group, means reflecting the conditions of the transaction as would have been obtained had the transaction been conducted between independent enterprises in a comparable transaction under comparable circumstances.